Ecclestone could face charges of bribery in past sale of F1 shares

The possibility that Formula One boss Bernie Ecclestone could face criminal charges carrying a lengthy prison sentence has been raised. The development came in the trial of German banker Gerhard Gribkowsky, which resumed in Munich this week.

For the first time, the former risk manager of the BayernLB bank in the Bavarian city admitted in court that he had taken millions of dollars from the CEO of the Formula One group—payments he said he regarded as bribes.

Sewarion Kirkitadze, a German legal consultant, told the Bild newspaper, “Bernie Ecclestone should expect the [the state prosecutor] to prepare an international arrest warrant and an extradition request. Ultimately he could face a prison sentence of up to 10 years.”

Gribkowsky has been held in the Stadelheim prison in Munich for the past 18 months, and the trial began in October. He is charged with receiving corrupt payments, tax evasion, and breach of trust against his employer when BayernLB's stake in the Formula One holding company was sold in 2006 to the present controlling shareholder, CVC Capital Partners.

Gribkowsky made the statement as part of a deal with prosecutors aimed at shortening the trial, and minimizing his sentence. Consequently the closing arguments in the case will be heard next week, and Gribkowsky will be sentenced shortly afterwards. In view of his confession, the judges informally agreed that Gribkowsky would get a prison term of between seven years and 10 months, and nine years, stated Peter Noll, the presiding judge.

Gribkowsky told the court, “I allowed myself to be bribed. It has taken me a long time to come to terms with what I did and to admit even to myself—yes, it was bribery, and yes, I should have paid tax. Even today I have troubles accepting this as reality. With hindsight, I know now that I should have said no to [Ecclestone's] demands.”

Gribkowsky was tasked by BayernLB with selling its Formula One shares. He said that when, during the Bahraini Grand Prix in 2006, Ecclestone asked him to “give him numbers,” he asked for $50 million, but did not expect to get anything like that amount. “$10 million would have been more normal,” he added.

The actual payments from Ecclestone and Bambino Holdings (his family offshore trust) amounted to $44 million, and were channeled from offshore accounts to companies in Austria controlled by the banker.

The indictment states that this money was a bribe to ensure that Gribkowsky sold BayernLB's shareholding to CVC, which had agreed to retain Ecclestone as the CEO if and when it gained control of F1. The prosecutors also allege that Gribkowsky set up a scam to cover most of the cost of the alleged bribe, signing a contract that committed BayernLB to paying Ecclestone a commission of $41.4 million for facilitating the sale.

There is also an allegation that says Gribkowsky undervalued the shares deliberately so that the sale did not trigger a profit-sharing payment to their former owner, EM.TV & Merchandising, a German media company.

EM.TV used its Formula One shares as collateral for loans from BayernLB and two other banks, Lehman Brothers and JP Morgan Chase.

When the three banks in 2002 assumed ownership of the shares when EM.TV went into receivership, EM.TV's administrator secured a clause in that transaction stipulating that it would receive a percentage if any future sale of the stake was valued at more than $1 billion. In a separate, civil case in the London High Court, EM.TV (now known as Constantin Medien) is suing Gribkowsky, Bambino, Ecclestone and Stephen Mullins (Ecclestone's former lawyer) for undervaluing the shares in such a way that it was cut out of the deal. Constantin is claiming approximately $175 million in damages. The Munich prosecutors have stated only that the shares were sold “without being properly evaluated”.

Ecclestone, now 82, admitted during testimony in November 2011 that he had made the payments to Gribkowsky. However, he continues to assert that they did not constitute a bribe. Instead, he claims that the money was a payoff to Gribkowsky, who was threatening to make a false claim to the British authorities to the effect that Ecclestone was controlling the Bambino trust, in violation of tax law. Ecclestone maintains that an investigation by the U.K.'s tax office would have caused him a lot of unjustified hassle, and potentially even more expense.

Ecclestone told the Bloomberg news agency, “I don't know what [the prosecutors] would charge me for. It's not the bribery, it's the tax evasion and [Gribkowsky's] duty to the bank that are the most important issues. If they were going to charge me, they would have done it at the same time [as Gribkowsky].

“I have always said that we gave him money, but it was not for what he said. He was shaking me down a bit and saying I had control of a family trust, which was not true. The reason I paid him was that he was going to say something that wasn't true. I was a bit stupid. Normally I would have told him to get lost.”

As to Gribkowsky's testimony this week, Ecclestone added, “He was offered a deal. He took the deal. I don't blame him for trying to get his sentence reduced. He could have got 12 to 14 years.”

The public prosecutors in Munich are not expected to make any statement about their position on Ecclestone until Gribkowsky has been sentenced. Thomas Steinkraus-Koch, a spokesman for the state, commented, “An investigation of Bernie Ecclestone has been underway since 2011. For now, we are waiting for the court's verdict in the trial of Gerhard Gribkowsky.”

Ecclestone lawyer, Sven Thomas, is clear that it does not automatically follow from Gribkowsky's new testimony that Ecclestone will be charged with paying a bribe.

“Dr. Gribkowsky's trial and the result of it are neither binding for the investigation into Mr. Ecclestone, nor is the evidence established in this case useable against him,” he said in a prepared statement. “Mr. Ecclestone's defense has not taken part in the ongoing trial; it could not exert any influence, and presented no evidence. This is particularly applicable to disproving the recent views [expressed] in the court about alleged agreements between Dr. Gribkowsky and Mr. Ecclestone.”

The statement also suggests that the plea-bargain nature of Gribkowski's “confession” throws its veracity into doubt.

“The defense in the investigation into Mr. Ecclestone will certainly have to deal not only with the motives and the events, but also with the substance of [Gribkowsky's] declaration,” it continued. “Its main features are contradictions as well as a lot of testimony to the contrary from Dr. Gribkowsky at the beginning of the proceedings. In various cases in recent years, third parties have been incriminated in 'confessions' which later—in subsequent proceedings—prove to be groundless.”